Economic factors: GDP part 2


Business confidence: can be a key influence on the business cycle. High levels of business confidence can be a self-fulfilling prophecy which could cause the economy to grow. . For this reason, government often try to describe the economy in positive terms so that confidence will increase. 

Implications for business and for its strategic and functional decision making of changes in the business cycle:

The strategies a business might use in response to changes in the business cycle will depend on which phase of the cycle the economy is in. For example, during a recession, many businesses will suffer declining demand. As a result they will wish to reduce production and improve efficiency. 

Economic growth: The recovery phase of a business cycle is characterised by a period of economic growth in an economy. Economic growth is an increase in the level of economic activity or GDP. Figures for economic growth are based on the percentage increase in real GDP. The level of economic growth in an economy is influenced by a number of factors. These include: 

  • The exploitation of valuable natural resources. For example, the extraction and sale of oil in the Middle East and in the North Sea has significantly increased economic growth in


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